Forget the door-busters, coupons, and “friends and family” deals. U.S. shoppers on the whole will be paying more over the next few weeks than they do the rest of the year. Turns out, retail profit margins tend to be higher during the holiday period, despite all the promotions.
Among the 15 largest U.S. retailers, operating margins in the holiday quarter last year were 11 percent, compared with 9 percent in the preceding nine months. Amid the year-end shopping frenzy, these companies padded their bottom lines, on average, by roughly one-quarter.
Here’s a full breakdown:
Home Depot and Lowe’s may be the only places where a shopper can expect to catch an honest break at the end of the year. Macy’s, Bed Bath & Beyond, and L Brands, the company behind Victoria’s Secret, are particularly adept at producing opulent holiday returns.
How can this be, a dewy eyed mall rat may wonder? For one, in the time-honored loss-leader tradition, most shoppers don’t stick to the killer deals. For every $98 flat-screen TV, there’s plenty more to buy at a 98 percent markup.
Perhaps more important, those deals aren’t that killer. As the Wall Street Journal recently detailed in depth, holiday savings are an illusion, a bit of C-suite sleight of hand as executives grow ever more adept at price massaging through the year. A lot of the most discounted products hardly ever sell at their full sticker price. Meanwhile, retailers regularly push prices of certain goods higher in the months before the holidays so Black Friday discounts will seem more impressive.
The deals this week will be fine. They might be even better in January. Plus: no lines, no crowds.